The 2013 Florida Legislature made several important changes to the law governing Florida limited liability companies (LLCs). The new law was based primarily on the Revised Uniform Limited Liability Company Act as amended in 2011.
Important changes from the current LLC law include:
Expanded list of fiduciary duties and management rules that cannot be “overridden” by the operating agreement
Changes to LLC governance, including new member voting rules
Elimination of the concept of “managing member”
Expanded categories for which indemnification of members and managers is prohibited
Expanded “safe harbor” for approving conflict-of-interest transactions
Modified rules for “derivative actions,” where a member may bring an action on behalf of the company
New provisions relating to equity exchanges and inbound domestications by non-U.S. entities
Expanded list of events giving rise to appraisal rates
Florida’s Revised LLC Act, consistent with the prior law, generally adopts a “default provision” approach, which permits the members of the LLC to enter into an operating agreement to regulate the affairs of the LLC and govern the relationship among the members, management, and the company. Most of the provisions of the Florida LLC statute are default provisions that only apply if the members fail to agree upon other specific rules. The current law imposed seven non-waiveable requirements that must apply to all Florida LLC agreements. These non-waiveable rules include prohibitions against elimination of the duty of loyalty, unreasonably reducing the duty of care, eliminating the obligations of good faith and fair dealing, and unreasonably restricting a member’s right to information and records.
The new law expands the list of non-waivable provisions. Under the Florida Revised LLC Act, operating agreements also may not relieve a person from the liability for bad faith or willful misconduct, restrict the power of a member to disassociate, unreasonably restrict the right of a member to maintain an action against another member, or provide indemnification for acts taken in bad faith.
The current Florida LLC law contains the concept of a managing member, who is elected from among the existing members. The new legislation eliminates the concept of a managing member and provides that existing LLCs that are managed by a managing member are deemed to be member-managed.
The Revised LLC Act authorizes an operating agreement or the articles of organization to establish an LLC’s status as manager-managed. As in current law, an LLC that does not effectively designate itself as manager-managed will operate under the statutory rules governing a member-managed LLC.
The Revised LLC Act continues the so-called “Olmstead Patch,” adopted in 2011 by the Legislature in response to the Florida Supreme Court decision Olmstead v. Federal Trade Commission, 44 So3d 76 (Fla 2010), which clarified that a charging order is the sole and exclusive remedy of a judgment creditor of a member of a multi-member LLC seeking to levy against the member’s LLC interest.
The new legislation represents an important step forward for Florida LLCs and their investors and managers. The new law assures that Florida LLCs will continue to be good choice of entity for organizing business ventures.
The governor is expected to sign the Revised LLC Act. The new law creates Chapter 605 of the Florida Statutes. Until January 1, 2015, LLCs in existence before January 1, 2014 may continue to operate under the provisions of current law, which are contained in Chapter 608. On January 1, 2015, all Florida LLCs are subject to the provisions under Chapter 605, and the old law, Chapter 608, is repealed.